Economic Calendar

Risk-aversion remained the dominant theme during the European session, as lack-lustre economic data from the US last week, and China, during the weekend, weighed on market sentiment. Allied to that, the ongoing contagion fears in the Eurozone dented the appetite for risk-among investors. European equities traded lower throughout the session, with particular weakness seen in financials, which was also reflected in the Italian FTSE MIB and Spanish IBEX 35 indices underperforming their European peers. Weak equities provided support to Bunds, whereas general widening was observed in the Eurozone peripheral 10-year government bond yield spreads. European sovereign concerns together with strength in the USD-Index weighed upon EUR/USD and GBP/USD, whereas safe-haven currencies including JPY and CHF received a boost. Elsewhere, WTI and Brent crude futures traded under pressure weighed upon by a strong USD as well as diminishing hopes of a sustainable economic recovery.

• BofA's Mortgage-Bond Pact Draws Challenge (WSJ)
• Greek Rescue Snarled by Sales (WSJ)
• Portuguese downgrade darkens euro zone rescue hopes (Reuters)
• Rare-Earth Prices Decline in China (WSJ)
• Geithner has not told Obama he wants to go (Reuters)
• Bless this mess: AGs, banks near $60B deal on foreclosures (NY Post)
• Orszag: Why We Care About Price of Water in China (Bloomberg)
• How America Ceded Capitalism’s Bastion to German Boerse (Bloomberg)

Markets witnessed risk-averse sentiment in early European trade partly on the back of comments from Moody's that China's local government debt may be USD 540bln larger than auditors estimated, which could endanger Chinese banks' credit ratings. Lower than expected services PMI data from China, and core Eurozone countries dented risk-appetite further, which in turn resulted in weakness in EUR and equities. However, as the session progressed equities gradually came off their earlier lows, and the oil & gas sector received some support after the UK Treasury announced tax support for North Sea oil companies. Elsewhere, GBP/USD gained strength following better than expected services PMI data from the UK. Moving forward, the economic calendar remains thin, however markets look ahead to economic data from the US in the form of durable goods revision and factory orders figures.

• Strauss-Kahn Case Seen as in Jeopardy (NYT)... yes, the soap opera is back.... although don't expect Lagarde to hand the keys back to DSK - after all the mission has been accomplished. Though president DSK would be a shoo in if cleared of all charges.
• China Salutes 90 Years of Communism (WSJ)... US salutes nearly 100 year of Federal Reserve central planning
• Obama Pushes for a Deficit Deal by July 22 (FT)
• China manufacturing at lowest in 2 years (FT)
• German Banks Agree to Greek Aid Deal (WSJ)
• Ex-Goldman director Gupta SEC Case Postponed Indefinitely (Fin Alternatives)
• Greek, Italian Bonds Lead Peripheral Rebound as Default Concern Ebbs (Bloomberg)
• Republicans boycott trade vote (FT)
• Obama Pushes for a Deficit Deal by July 22 (FT)

• Rice Supplies Tightening in China May Increase Imports, Bolster Inflation (Bloomberg)
• IMF warns US of global debt ‘shock’ (FT)
• China may widen yuan trading band soon-Bank of China (Reuters)
• Italy May Raise Trading Tax (WSJ)
• Deutsche Bank warns on voluntary rollover (FT)
• GOP wants Senate to cancel vacation (Washington Times)
• As QE2 ends, market debates Fed's next move (Reuters)
• Greek parliament expected to endorse second bill (Reuters)
• Appeals Court Says Health Law Is Constitutional (WSJ)

• Greek Unions Strike as Papandreou Seeks Support (Bloomberg)
• Massive Strike Set for U.K. (WSJ)
• U.S. Money Funds Risk Losses From Europe Crisis (Bloomberg) - Mainstream media finally wakes up
• Dubai Denies Emirate Neighbors Fuel in Struggle to Pay Debt (Bloomberg) The untold story
• Europe looks for contingency plan B (FT)
• Plan B Budget Emerges in California (WSJ)
• Greek woes may eclipse Lehman: Ackermann (Reuters)
• Italian, Spanish Bonds Advance Before Sale on Greek Optimism (Bloomberg)
• China, U.K. Forge New Trade Deals (WSJ)
• Confidence in Canada Economy at Two-Year Low, Nanos Poll Shows (Bloomberg)

• Bernanke Public Approval Falls to Lowest (Bloomberg)
• On Governments as Portfolio Managers (El-Erian) - good read on the distinction between good and bad inflation
• Of Wealth and Incomes: Why Americans are so unhappy with this economic recovery (WSJ Editorial)
• Wen Says China Succeeding in Inflation Battle with Price Gains Set to Slow (Bloomberg)
• EU Halts New Greek Backtrack (WSJ)
• Greek Austerity Measures Still Unclear (Market News)
• Greek Default Insurance Costs Drop (WSJ).... yes, sub 1 point profit taking in 20 pts up CDS is now headline worthy
• Feds to Launch Probe of Google (WSJ)
• Italy’s Draghi Appointed to Succeed Trichet as ECB President (Bloomberg)

• America Faces Critical "Colonel Jessup" Moment (RCM)
• Democrats push for jobs package in debt deal (Reuters)
• HSBC Preliminary China June PMI Falls to 11-Month Low (WSJ)
• Most Euro-Zone Economies Contract (WSJ)
• Trichet Says Risk Signals Are Flashing Red as Debt Crisis Threatens Banks (Bloomberg)
• A Divine Wind Blows Against Iran’s President (NYT)
• Syrian troops mass near Turkish border (Reuters)
• Yemen Jailbreak by Al-Qaeda Fighters Highlights Risk of Descent into Chaos (Bloomberg)
• Buy and Hold Crushes Day Traders, New Report Shows (CBS)
• Greek, Irish Incomes Take Hit (WSJ)

• Poll: 44% of Americans Say Worse Off Under Obama (Bloomberg)
• QE 2 Proves No Silver Bullet (Hilsenrath)
• China’s Money Rate Rises to More Than Three-Year High as Banks Hoard Cash (Bloomberg)... hmm, where have we heard this before...
• Europe’s Threat to Asian Exports May Force Slower Interest-Rate Increases (Bloomberg)
• Fed Frets Over Fiscal Recklessness Behind Calm of 0.09% Yield (Bloomberg)
• Greek Two-Year Government Notes Rise After Papandreou Wins Confidence Vote (Bloomberg)
• Plan to Ease Way for Unions (WSJ)
• PIMCO's El-Erian predicts Greece, others will default (Reuters)
• IMF: Spain needs bolder job-market reforms (Businessweek)

• Papandreou Confidence Vote May Decide Greece’s Fate (Bloomberg)
• Fitch sees risk of Greece, U.S. debt defaults (Reuters)
• China’s new bond buying hints at shift to euro (MarketWatch) as was reported on Zero Hedge 3 weeks ago
• David Cameron: We won't bail out Greece (Telegraph)
• Change in China Hits U.S. Purse (WSJ)
• Debtors hail changes to EU rescue fund (FT)
• SEC Should Free ’Fab’ Tourre, Target Big Fish: (William Cohan)
• German energy plan seen as ‘viable’ (FT)
• Kenya Shilling at 17-Year Low on Inflation (Bloomberg)
• China Floods Claim Victims, Crops (WSJ)

Risk-appetite, which emerged last Friday, couldn’t sustain its momentum today after Eurozone finance ministers decided to delay any final decision on a new Greek rescue package till July. The decision led to a re-emergence of risk-aversion, which provided support to the USD-Index and in turn weighed on EUR/USD and GBP/USD. The ongoing Greek debt concerns once again weighed on equities, with particular underperformance seen in financials, which underpinned the strength in Bunds. Allied to this, Eurozone peripheral 10-year government bond yield spreads widened led by the Greek/German spread.

• And the truth keeps coming out: Evacuation urged for radioactive hot spots in Japan beyond 20km zone (Japan Times)
• Germany's Merkel: Europe and Euro Tightly Bound Together (WSJ)
• Hardline IMF forced Germany to guarantee Greek bailout (Guardian)
• Hunt for ‘Holy Grail’ Hunt Pits ECB Against Naked Banks (Bloomberg)
• Default by Greece ‘Almost Certain’: Greenspan (Bloomberg)
• SEC could file Civil Fraud charges against some Raters (Reuters)
• Merkel’s Greek Bondholder Gambit Tested as Sarkozy Visits Berlin (Bloomberg)
• Biggest banks face capital clampdown (FT)
• Too Big to Fail Ends With Wave of a Magic Wand (Bloomberg)
• Biden Talks Aimed at $4 Trillion in Cuts Over 10 Years (WSJ)
• California's Brown vetoes fellow Democrats' budget (Reuters)
• U.S. Confidence Out of Sync With Stock Gains (Bloomberg)

• Europe Faces ‘Lehman Moment’ as Greece Unravels (Bloomberg)
• Lenders Dig In on Rules (WSJ)
• White House Says Limits on War Powers Don’t Apply to U.S. Mission in Libya (Bloomberg)
• Canada seeks US tax law exemption (FT)
• Czech transport workers strike over austerity (FT)
• U.K. Retail Sales Drop More Than Forecast (Bloomberg)
• Ireland Opens New Front as ECB Battles to Avert Another Meltdown (Bloomberg)
• Papandreou to name new cabinet (FT)
• Samsonite Slump, Market Tumble Loom Over Prada IPO Pricing (Bloomberg)

• Fed Officials Discuss Explicit Inflation Target (Bloomberg)
• No Fed Shift Seen at June Gathering (Jon Hilsenrath)
• China Developers’ Outlook Lowered to ‘Negative’ by S&P as Credit Tightens (Bloomberg)
• SEC probes Merrill CDO sale (FT), Is Andrew Ross Sorkin already drafting explanation how Merrill was not, repeat NOT short anything? Or is Bank of America just not a Dealbook sponsor?
• The Economy Is Now Immune to Keynesian Crack (Peter Schiff)
• Rosenberg '99%' sure of U.S. recession (Forbes)
• China Inflation Heading for 6% Shows Danger for Wen Extending Rate Pause (Bloomberg)
• White House wants business to aid in debt cap fight (Reuters)

• U.S. Says Bank of America Corp. "significantly hindered" a federal investigation of the company's foreclosure practices (WSJ)
• Additional 23 Fukushima workers exposed to high radiation (NHK)
• US mirrors sluggish global job creation  (FT)
• Getting Away With It - Why are Galleon's investors not impaired? (NYT)
• The Fed flood slows to a trickle (FT)
• Rising Prices a Risk (WSJ)
• Berlusconi suffers stinging referendum defeat (Reuters)
• Roubini Warns Of Euro Break Up As Greek Credit Rating Tumbles (Forbes)
• China Govt Could Cont Hiking Int Rates (Market News)
• Trichet signals hostility to Greek ‘credit event’  (FT)
• Qaddafi Coddled by U.S. Oil Producers (Bloomberg)